Communication of Key Audit Matters in the Public Accountant's Report on Financial Statements Audited in the Capital Market

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 30 OF 2023
CONCERNING
COMMUNICATION OF KEY AUDIT MATTERS IN THE PUBLIC ACCOUNTANT'S REPORT ON FINANCIAL STATEMENTS AUDITED IN THE CAPITAL MARKET BY THE GRACE OF THE ALMIGHTY GOD THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering:
a. that users of financial statements need more informative and transparent reports from public accountants regarding audits conducted, thereby increasing the communicative value of the public accountant's report; b. that the communication of key audit matters in the independent auditor's report, as regulated in audit standards, only applies to audits of issuer financial statements, so the Financial Services Authority needs to regulate the clarification and explanation regarding other parties required to apply the communication of key audit matters in the public accountant's report, in the supervision sector of the capital market, derivative finance, and carbon exchange;
c. that the communication of key audit matters in the public accountant's report can serve as a basis for users to better connect with management and those charged with governance, particularly regarding the preparation of financial statements;
d. that based on the considerations referred to in letters a, b, and c, it is necessary to establish a Financial Services Authority Regulation concerning the Communication of Key Audit Matters in the Public Accountant's Report on Financial Statements Audited in the Capital Market;

Recalling:

1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) as amended by Law of the Republic of Indonesia Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);

DECIDES:
Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING COMMUNICATION OF KEY AUDIT MATTERS IN THE PUBLIC ACCOUNTANT'S REPORT ON FINANCIAL STATEMENTS AUDITED IN THE CAPITAL MARKET.

CHAPTER I
GENERAL PROVISIONS
Article 1
In this Financial Services Authority Regulation:

1. Key Audit Matters are matters determined by the auditor's professional judgment to be the most significant in the audit of the financial statements for the current period.
2. Capital Market is a part of the financial system related to activities:
   a. public offerings and securities transactions; b. investment management;
   c. issuers and public companies related to the securities they issue; and
   d. institutions and professions related to securities.
3. Public Accountant is a person who has obtained a license to provide services in accordance with laws regarding public accountants and is registered with the Financial Services Authority.
4. Collective Investment Contract, hereinafter abbreviated as CIC, is a contract between the investment manager and the custodian bank that collectively binds shareholders or investors, where the investment manager is authorized to manage the collective investment portfolio and the custodian bank is authorized to carry out collective custody.
5. Public Company is a corporation with the number of shareholders and paid-up capital determined by Financial Services Authority Regulation.

Article 2
Entities with public accountability in the Capital Market consist of:
a. entities conducting a Public Offering of:
1. shares;
2. bonds;
3. sukuk; and/or
4. structured warrants,
whose securities are listed and/or traded on a securities exchange; b. entities serving as vehicles used to raise funds from the public for subsequent investment in investment portfolios, and whose securities are listed and traded on a securities exchange, consisting of:
1. mutual funds in the form of CIC whose participation units are traded on a securities exchange;
2. asset-backed securities CIC;
3. asset-backed securities in the form of participation certificates;
4. infrastructure investment funds in the form of CIC; or
5. real estate investment funds in the form of CIC;
c. entities serving as vehicles used to raise funds from the public for subsequent investment in investment portfolios, and whose securities are not listed on a securities exchange, consisting of:
1. mutual funds in the form of CIC;
2. mutual funds in the form of limited participation CIC;
3. asset-backed securities CIC;
4. multi-asset investment funds in the form of CIC;
5. infrastructure investment funds in the form of CIC;
6. real estate investment funds in the form of CIC;
7. CIC for raising housing savings funds;
8. asset-backed securities in the form of participation certificates;
9. mutual funds in the form of corporations; or
10. other collective investment products determined by the Financial Services Authority;
d. Public Companies; e. entities conducting activities in the Capital Market, including:
1. securities exchanges;
2. clearing and guarantee institutions;
3. depository and settlement institutions;
4. securities companies holding business licenses as securities brokers and/or securities underwriters, or investment managers;
5. rating agencies;
6. securities valuation institutions;
7. carbon exchange organizers;
8. investor protection fund organizers; or
9. securities financing institutions; and
f. other entities in the Capital Market determined by the Financial Services Authority.

CHAPTER II
DISCLOSURE OF KEY AUDIT MATTERS
Article 3
Entities with public accountability in the Capital Market as referred to in Article 2 are required to submit the Public Accountant's Report on audited financial statements to the Financial Services Authority by disclosing Key Audit Matters.

Article 4
Audited financial statements submitted to the Financial Services Authority by prospective entities as referred to in Article 2 letter a or prospective Public Companies as referred to in Article 2 letter d, which are part of the registration statement documents, must include the disclosure of Key Audit Matters in the Public Accountant's Report for the current period.

Article 5
(1) Public Accountants are required to prepare the Public Accountant's Report on the audit of financial statements from entities with public accountability as referred to in Article 2 in accordance with Public Accountant professional standards, unless otherwise determined by the Financial Services Authority. (2) In the event that the Financial Services Authority determines other provisions regarding the preparation of the Public Accountant's Report for audit assignments on financial statements from entities with public accountability in the Capital Market that differ from the Public Accountant professional standards as referred to in paragraph (1), Public Accountants must comply with such determinations. (3) The Public Accountant's Report as referred to in paragraph (1) must contain Key Audit Matters prepared and disclosed in accordance with audit standards regarding the communication of Key Audit Matters in the independent auditor's report.

Article 6
The disclosure of Key Audit Matters in the Public Accountant's Report must be applied to:
a. unqualified opinions; and b. modified opinions consisting of:

1. qualified opinions; and
2. adverse opinions,
   in accordance with Public Accountant professional standards, unless otherwise determined by the Financial Services Authority.

Article 7
(1) Public Accountants are required to communicate matters to be determined as Key Audit Matters with those charged with governance in the preparation of financial statements. (2) Entities with public accountability in the Capital Market as referred to in Article 2 must appoint those charged with governance in the preparation of financial statements after first communicating with the Public Accountant. (3) The appointed party as referred to in paragraph (2) must communicate regarding matters to be determined as Key Audit Matters communicated by the Public Accountant. (4) Entities with public accountability in the Capital Market must document and store the results of communication between those charged with governance and the Public Accountant.

Article 8
(1) Those charged with governance in the preparation of financial statements as referred to in Article 7 paragraph (1):
a. audit committees for entities required to have an audit committee; b. investment managers and custodian banks for entities issuing investment products in the form of CIC; or
c. issuers and custodian banks for entities issuing asset-backed securities in the form of participation certificates.
(2) In the event that entities do not yet have an audit committee as referred to in paragraph (1) letter a, those charged with governance in the preparation of financial statements:
a. board of commissioners; b. supervisory board;
c. management committee; or
d. individuals/groups of people responsible for corporate governance.

CHAPTER III
KEY AUDIT MATTERS NOT PRESENTED IN THE KEY AUDIT MATTERS PARAGRAPH
Article 9
(1) Public Accountants are prohibited from disclosing matters determined as Key Audit Matters if:
a. applicable laws and regulations prohibit the disclosure of matters chosen as Key Audit Matters to the public; and/or b. in conditions having detrimental consequences to public interest exceeding the benefits. (2) Public Accountants disclose matters determined as Key Audit Matters in other paragraphs if the chosen Key Audit Matters are the cause of:
a. a modified opinion consisting of a qualified opinion and an adverse opinion; or b. material uncertainties related to events or conditions that may cause significant doubt about the entity's ability to maintain its going concern status. (3) In the event that conditions as referred to in paragraph (1) and/or paragraph (2) are met, Public Accountants must provide a written explanation to entities with public accountability in the Capital Market simultaneously with the submission of audited financial statements. (4) Entities with public accountability in the Capital Market must submit the written explanation from the Public Accountant as referred to in paragraph (3) to the Financial Services Authority simultaneously with the submission of audited financial statements. (5) Public Accountants and entities with public accountability in the Capital Market must maintain the confidentiality of the written explanations as referred to in paragraph (3) and paragraph (4).

Article 10
Public Accountants must provide written explanations as referred to in Article 9 paragraph (3) and paragraph (4) containing at least:
a. letterhead of the Public Accountant's office; b. date of the letter same as the date of the Public Accountant's Report on the audit conducted;
c. the addressee;
d. reasons for not disclosing the matter chosen as Key Audit Matters in the Key Audit Matters paragraph of the Public Accountant's Report; and e. signature, name, and registration certificate number of the Public Accountant auditing the financial statements.

CHAPTER IV
FIRST IMPLEMENTATION OF COMMUNICATION OF KEY AUDIT MATTERS
Article 11
The first implementation of the communication of Key Audit Matters in the Public Accountant's Report submitted by entities with public accountability in the Capital Market must be carried out with the following provisions:
a. entities as referred to in Article 2 letter a and letter b, apply to audits of annual financial statements for 2023. b. entities as referred to in Article 2 letter c, letter d, and letter e, apply to audits of annual financial statements for 2024.
c. other entities in the Capital Market as referred to in Article 2 letter f, apply to audits of annual financial statements submitted for the first time to the Financial Services Authority.

CHAPTER V
SANCTIONS
Article 12
(1) Any party violating provisions as referred to in Article 3, Article 5, Article 6, Article 7 paragraph (1) and paragraph (3), Article 9 paragraph (1), paragraph (3), paragraph (4) and paragraph (5), Article 10, and/or Article 11 in this Financial Services Authority Regulation shall be subject to administrative sanctions. (2) Administrative sanctions as referred to in paragraph (1) may be imposed on parties causing violations of this Financial Services Authority Regulation. (3) Sanctions as referred to in paragraph (1) and paragraph (2) are imposed by the Financial Services Authority. (4) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warnings; b. fines, namely the obligation to pay a certain amount of money;
c. business activity restrictions;
d. business activity suspension; e. business license revocation; f. approval cancellation; and/or g. registration cancellation.
(5) Administrative sanctions as referred to in paragraph (4) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without prior imposition of administrative sanctions in the form of written warnings as referred to in paragraph (4) letter a. (6) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed alone or together with the imposition of administrative sanctions as referred to in paragraph (4) letter c, letter d, letter e, letter f, or letter g. (7) The procedure for imposing sanctions as referred to in paragraph (3) is carried out in accordance with applicable laws and regulations.

Article 13
In addition to administrative sanctions as referred to in Article 12 paragraph (1), the Financial Services Authority has the authority to issue specific action orders against any party violating the provisions of this Financial Services Authority Regulation.

Article 14
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 12 paragraph (4) and specific action orders as referred to in Article 13 to the public.

CHAPTER VI
CLOSING PROVISIONS
Article 15
Provisions regarding the appointment of those charged with governance in the preparation of financial statements by entities with public accountability in the Capital Market as referred to in Article 7 paragraph (2) and the obligation of Public Accountants to provide written explanations as referred to in Article 9 paragraph (3) shall take effect 90 (ninety) days after this Financial Services Authority Regulation is enacted.

Article 16
This Financial Services Authority Regulation takes effect on the date of enactment.

This copy is consistent with the original
Legal Director 1
Legal Department
Mufli Asmawidjaja

For the knowledge of everyone, ordering the enactment of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia Established in Jakarta on 29 December 2023 DEPUTY CHAIRMAN OF THE BOARD OF COMMISSIONERS ACTING AS A MEMBER OF THE BOARD OF COMMISSIONERS SUBSTITUTE FOR THE CHAIRMAN OF THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA, MIRZA ADITYASWARA Enacted in Jakarta on 29 December 2023 MINISTER OF LAW AND HUMAN RIGHTS REPUBLIC OF INDONESIA, YASONNA H. LAOLY STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2023 NUMBER 48/OJK signed EXPLANATION OF FINANCIAL SERVICES AUTHORITY REGULATION OF THE REPUBLIC OF INDONESIA NUMBER 30 OF 2023 CONCERNING COMMUNICATION OF KEY AUDIT MATTERS IN THE PUBLIC ACCOUNTANT'S REPORT ON FINANCIAL STATEMENTS AUDITED IN THE CAPITAL MARKET

I. GENERAL
To improve the quality of Public Accountant Reports to be more informative, the Indonesian Institute of Public Accountants has established and approved a new Audit Standard, namely Audit Standard 701 concerning the Communication of Key Audit Matters in the Independent Auditor's Report. This Audit Standard 701 relates to the auditor's responsibility to communicate Key Audit Matters with those charged with governance and to include them in the Public Accountant's Report. Audit Standard 701 has been effective for audits of financial statements for periods starting on or after January 1, 2022, for audits of a complete set of general purpose financial statements of issuers and conditions when auditors decide to communicate Key Audit Matters in the Public Accountant's Report, and also applies when auditors are required by laws and regulations to communicate Key Audit Matters in the Public Accountant's Report. Law Number 21 of 2011 concerning the Financial Services Authority as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector, particularly Article 5, has mandated the Financial Services Authority to conduct an integrated regulatory and supervisory system for all activities in the Indonesian financial services sector. The Financial Services Authority, as a supervisory agency, is required to play a more active role in performing its supervisory functions well, in accordance with generally applicable best practices and in accordance with recent developments in each financial services industry. In order to regulate and supervise the communication of Key Audit Matters in the Capital Market sector, supervisors at the Financial Services Authority require regulations that can serve as a legal basis for effective supervision. With this regulation, it is expected that there will be equality of all Public Accountant Reports on audits of financial statements of entities in the Capital Market, having applied the communication of Key Audit Matters.

II. ARTICLE BY ARTICLE
Article 1
Clear enough.
Article 2
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
Number 1
Mutual funds in the form of CIC, including:
a. money market mutual funds; b. fixed income mutual funds;
c. equity mutual funds;
d. mixed mutual funds; e. protected mutual funds; f. guaranteed mutual funds; g. index mutual funds; and h. target date mutual funds.
Number 2
Clear enough.
Number 3
Clear enough.
Number 4
Clear enough.
Number 5
Clear enough.
Number 6
Clear enough.
Number 7
Clear enough.
Number 8
Clear enough.
Number 9
Clear enough.
Number 10
Clear enough.
Letter d
Clear enough.
Letter e
Clear enough.
Letter f
The term "other entities in the Capital Market" refers to new entities issuing new products, or old entities issuing new products.
Article 3
The term "financial statements of entities with public accountability in the Capital Market" refers to general purpose financial statements presented using a fair value approach. The term "Public Accountant's Report" refers to the independent auditor's report as referred to in Public Accountant professional standards issued by recognized Public Accountant professional associations in Indonesia.
Article 4
Example:
If a Prospective Issuer submits financial statements for periods March 31, 2024, December 31, 2023, December 31, 2022, and December 31, 2021, then the Public Accountant's Report on interim financial statements as of March 31, 2024 contains Key Audit Matters, not in the Public Accountant's Report on financial statements for the periods December 31, 2021, December 31, 2022, and December 31, 2023.
Article 5
Paragraph (1)
The term "unless otherwise determined by the Financial Services Authority" means that the Financial Services Authority may determine the preparation of Public Accountant's Reports on audits of financial statements from entities with public accountability in the Capital Market in accordance with the authority in Article 66 paragraph (5) of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector. Paragraph (2) Clear enough. Paragraph (3) Clear enough.
Article 6
Clear enough.
Article 7
Paragraph (1)
Clear enough.
Paragraph (2)
The appointment of those charged with governance by entities with public accountability in the Capital Market is carried out during the discussion of the audit scope. Paragraph (3) The term "communicate" refers to documented discussion activities conducted by Public Accountants with those charged with governance in the preparation of financial statements, in formulating Key Audit Matters agreed to be disclosed in the Public Accountant's Report. Paragraph (4) Clear enough.
Article 8
Clear enough.
Article 9
Paragraph (1)
Letter a
Clear enough.
Letter b
Conditions having detrimental consequences to public interest exceeding the benefits include, among others, causing significant stock price changes or causing a run. Paragraph (2) The term "other paragraphs" refers to the disclosure of Key Audit Matters in the basis for opinion paragraph or the going concern paragraph. Paragraph (3) Clear enough. Paragraph (4) Clear enough. Paragraph (5) The term "maintain the confidentiality of written explanations" means that entities with public accountability in the Capital Market only submit written explanations to the Financial Services Authority.
Article 10
Letter a
Clear enough.
Letter b
Clear enough.
Letter c
The term "addressee" refers to the management of entities with public accountability in the Capital Market and the Financial Services Authority supervision sector for capital markets, derivative finance, and carbon exchanges. Letter d Clear enough. Letter e Clear enough.
Article 11
Clear enough.
Article 12
Clear enough.
Article 13
Specific actions include, among others, reissuing the Public Accountant's Report.
Article 14
Clear enough.
Article 15
Clear enough.
Article 16
Clear enough.
SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 70/OJK